What Is Universal Basic Income, and How Would It Impact the Economy?

The other day I watched a very interesting discussion on the Joe Rogan Show with Jordan Petersen and Bret Weinstein about the effectiveness of universal basic income to solve economic inequality. Essentially, universal basic income is a periodic and unconditional sum of cash delivered to every individual regardless of status. The video is below.

I enjoyed this entire interview and it piqued my interest primarily because not only did Joe Rogan pull a clinical psychologist and a biologist to discuss a concept which is relatively foreign to their expertise, but they were able to use their knowledge to discuss and draw conclusions to a topic they weren’t necessarily experts in.

I liked Petersen’s perspective on universal basic income. He is able to criticize both the Left and the Right on their talking points about productivity and economic output. In addition, he brings up a unique point I had previously overlooked. It is not denied by anyone that capitalism creates inequality. Inequality in and of itself is neither a good nor a bad thing. It just is simply because we all pursue different careers, have different work ethics, and grow up in different situations, so of course, there will be inequality so long as there is some degree of freedom in society.

To eradicate inequality and to carry out a system of pure egalitarianism would eliminate all the productive workers, as Petersen notes, and the society will be left to starve. In addition, inequality is needed to promote innovation and to find ways to increase productivity, thereby increasing standard of living. However, inequality does correlate with increased crime, and Petersen’s argument is that if you let the free market create the most efficient means of production, you will let inequality increase, which will inevitably lead to more crime. It’s no coincidence that crime rates are highest in third-world countries where income inequality and corruption is highest.

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The fatal flaw in Petersen’s argument is that government creates inequality artificially, whereas the free market creates inequality naturally. The government systematically rigs the “game,” so to speak, against a certain demographic. In a free market society, there is no institution to rig, so any income inequality that exists is purely a result of natural factors. He acknowledges this later on, stating that as long as people don’t believe there is systematic oppression putting them in their lower-class status, they will be indifferent to any kind of inequality that exists.

If I were in the studio, I would have deliberated on an important point which neither Petersen nor Weinstein discussed: those currently in the bottom percentiles of wealth don’t always stay there, and many people who used to be among the wealthiest may be relatively poor today. Economic mobility is more powerful than people think, especially in first-world countries. Look no further than immigration rates across the world. Immigration is highest in well-developed nations precisely because of the opportunities to go from rags to riches.

Secondly, neither Petersen nor Weinstein points out how the wealthiest in the world are commonly over the median age. Spectrem Group notes that the average age of millionaires is 62 years old. The reason why the wealthiest people on the planet are near retirement age is that they’ve lived long enough to gain experience in an industry and accumulate wealth, sometimes using that wealth wisely to return back with high interest. Many people in the bottom quartiles of wealth are not necessarily there because the game is rigged against them. Rather, those who are younger and inexperienced are over-represented in the bottom quartiles, and over the next decade or two, will see their income and wealth climb to the higher quartiles.

I agree with Petersen in that universal basic income is not a good idea because it doesn’t address the root cause of inequality. The majority of the wealthiest people on the planet are not that much smarter than average or work harder than lower and middle-class citizens. There’s an old saying that goes, “As adults, we have no idea what we’re doing. We’re just pretending we do.” What wealthy people have is not intelligence or even a hard work ethic, but rather a desired set of skills, successful habits, and powerful connections which are able to launch them to the top of the financial food chain.

The largest obstacles blocking working-class citizens from financial success is not education or greedy CEOs, but attaining a set of skills and knowing people who will elevate them to the upper class. Enacting a guaranteed or universal basic income will funnel money down to the lower class but will never funnel the knowledge or skills needed to succeed in our modern world.

Ultimately, the question that separates people on guaranteed incomes boils down to would you rather give a man a fish or teach a man to fish?